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When calculating the capital needed to live off the interest, you need to subtract inflation from the interest, as 1000$ will be worth less and less every month
by namdnay 9y ago
When calculating the capital needed to live off the interest, you need to subtract inflation from the interest, as 1000$ will be worth less and less every month. What you need to survive is "equivalent to 1000$ today", not "1000$".
- IanCal 9y agoThe safe withdrawal rate of 4% (or whichever figure you pick) already includes inflation. The rule is supposed to be that you have a high probability of withdrawing $X per year, each year, adjusting for inflation, where $X is 4% of your initial starting sum.